Then I would like to welcome you all to this telephone conference about Bilia's results for the first quarter 2020. My name is Kristina Franzén, and I'm the CFO of Bilia, and together with me, I have-
Per Avander, and I am the Managing Director for Bilia.
Mm-hmm. And all the results that we will talk about during the presentation will be results including IFRS 16. And for those of you that usually listen in to our telephone meetings, you know that we last year actually presented results excluding IFRS 16. However, as we do now have a comparative year, we said that we would change that and include IFRS 16. So that is just good for you to know. And before I let Per talk, I would just like you all to mute your phones to make it a little bit easier to listen in for everybody. So I would really appreciate if you mute your phones. So Per.
Yes. We would like to start with some highlights from the quarter one report, and after that, we can have question and answer. And I will [Foreign Language] Please? Please, please.
Could you, could you please mute your phone? That would be really appreciated. And then you can turn it on when it's time for questions.
Yeah.
Thanks a lot.
Okay, we improved our result with SEK 41 million, or 70%, despite poorer results in West Europe due to the government restrictions for corona. We had a result in West Europe, SEK 60 million, less than the quarter one last year. The service business improved the result with SEK 45 million or 21%. Operating profit in quarter one was SEK 279 million compared to SEK 238 million last year. It was the highest result ever, both in margin and Swedish crowns. The margin was 3.7%, compared to 3.5% last year. The service business had a result of SEK 263 million compared to SEK 218 million last year.
We had one working day more in all countries except Sweden, and Sweden had the same, days, if you compare to the last quarter one. We had a growth, in Sweden and Norway, 8%. It's a strong, growth, and Sweden closed 9%. In West Europe, we had -17%, due to Luxembourg, we closed down, 2.5 week in, in March, Belgium, two weeks, and in Germany, we closed down two, outlets, plus the car sales for all our seven outlets. We often report our service subscription, and we increased them with 9,000 if you compare to one year ago. And today we have 116,000 compared to the target 130,000.
We also report our tire hotels and how many units we have in our stores, and we increased with 36,000 units compared to the last year. Today we have 357,000 compared to the aggressive target we have 600,000. The car business, we reported SEK 6 million lower result compared to the last year, SEK 11 million compared to SEK 24 million. The used car business reported 24 million Swedish crowns compared to 36. It's a drop with SEK 12 million. In a historical perspective, it's a good result, if you go back to 2018, 2017.
We have a price pressure for the moment after the corona, and our strategy is to have a high turnover rate of the used car store and have a little bit lower margin. This is the fourth crisis for me in Bilia, started 1992 with the bank crisis. And often we have a drop in the price of used cars for a while, but when we deliver fewer new cars, so after a while, the price is, it's starting to increase again for the used cars. And I never know what will happen this time, but three crises before, we have had the same situation. New cars, we reported a loss on SEK 6 million compared to minus SEK 12 million last year.
The underlying order taking in quarter one was 11% less if you compare to the last year. We had a good situation of the order taking in January and February, and the last two weeks, we dropped a lot in order taking in all our countries. As I said before, West Europe closed down the sales, so it was zero. In Sweden and Norway, it was around the half of the normal spring season of order taking. The underlying backlog increased under the first quarter with 1,800 new cars. Today, we have 13,600 new cars in backlog. It's the highest backlog ever. We expect we will reduce the backlog in quarter two, quarter three due to the weaker order taking.
Another effect can be that the factories have closed down, so today they are starting to open up again. Here in Sweden, Torslanda, Volvo, they opened up the last week, and in beginning of May, the BMW factories will start to open up. But today, we don't have,
Yes. Yes, Marcus.
Today, we can't say when we will, we'll start to deliver all the cars we have in the backlog. But I guess we will have a little bit better in quarter three compared to quarter two, because when they open up the factories, they will start on the low level from the beginning in May, and up and higher tempo in June. Okay, Kristina?
During the first quarter, we generated a positive operational cash flow amounting to SEK 250 million. It came primarily from lower working capital, inventory, accounts receivable, and accounts payable. If you compare to last year, you could see that at that point in time, we were actually a little bit higher than we were this year. But at that point in time last year, we actually had the inventory on a too low level during the first quarter, so that's the main reason. If we look at the financial position, we reported a liability towards the bank of SEK 247 million out of the total credit payment of SEK 1.5 billion. Again, if you compare to last year, we actually had a reported receivable, so we had cash on our hands.
And the main reason for the deviation is that we have included in this credit limit this year also the financing of our German operation, and that was not the case last year. If we would exclude the financing of the German operations, we would actually also this year have a positive balance towards the banks. There are available credit limits in Germany for that operation, so we could, if we desire, move back into those credit limits. Then, as you might have seen, we prolonged our credit agreement with our banks, Nordea and DNB, during the year. They are prolonged with additional three years with a possible extension for another one plus one year. So that is good for us.
If we look at the net, net debt, that decreased by SEK 135 million since the year end, excluding the IFRS 16 liabilities, and that means that we now have a ratio of net debt to EBITDA of 1.2, which is basically in line with the rating we had by the end of last year. When it comes to the annual general meeting, you might have seen that that meeting was postponed. There have now been a new date set, so it means that the annual general meeting will take place on the 22nd of June, and that will then also include a decision or a proposal from the board on the dividend. Yeah.
If you are looking forward, start with the total market for 2020. In the beginning of 2020, the forecast in Sweden was 330,000 new cars. The Swedish association for the different brands we have in Sweden, they have adjusted the forecast to 270,000 new cars. For me, personally, I think it's a little bit too high, so I guess it will be a little bit lower, 250,000. But I know that the Swedish, they will come back with many new forecasts for 2020, because it's not so easy to navigate for the moment, in the situation we are in. In all the other countries we are in, we don't have a new forecast, but the forecast we have presented earlier, we can say it's too high.
So maybe we come back later when we can have new forecasts for the other countries. If you are looking forward to quarter two and quarter three, and see what will happen, we can see we have a good demand in the service business in April. We have a good demand in used car, but what I told you before, that we have a pressure of the price for the moment. West Europe has been closed in April, and there is a discussion to open up now in the beginning of May or in the middle of May. But I guess it will affect us a lot when we talk order taking and demand in the service business.
In Norway, for the moment, we are open up a little bit more, and the demand in the Norwegian market for the service business is quite good. I talked about the order taking, and to navigate there is not easy for the moment. The fleet business is running well, but the private person, they are a little bit careful for the moment. And if I talk about other crisis we have been in, so often the private person, they have started to buy newer used cars. And we don't know for the moment if we can get some new restrictions in some other countries, close down some outlets or not. But yes, and often we get the question about the spare parts, and maybe some of you have re-read in the newspaper.
But, for the moment, we have spare parts because one example is they closed down France, Spain, Italy, and then we can get more spare parts. We had a lack of spare parts for body and paint shop, Toyota and Lexus, but today it's much better again.
Mm-hmm. So all in all, of course, the spreading of the coronavirus means that it has significantly changed the way we do operations within Bilia. And the first priority within our business operation is to have the highest possible security for both our customers and our employees. It means that we offer pick up of cars when the customers are coming into our workshop, if that is a desire for the customer. We do use protection equipment when we take care of the cars, both when they come into the workshop, but also when we are to deliver the cars to the customer. And of course, when we meet customer, we ensure that we keep the distance, and that is, of course, valid also when it comes to meeting colleagues and coworkers within Bilia.
When we now are about, hopefully, to open up the businesses in Luxembourg and Belgium, we will make sure that we have masks and gloves and whatever is required in those countries to ensure that there is a safe operation. Our target is to run the business as much in a normal way as possible. However, we have, of course, also taken certain measures to try to minimize or lower the impact of our financial results. And those measures are, as an example, that we have stopped recruiting of new people. We have stopped to make purchases unless it's really needed.
We have stopped temporary or test employment of people, and we are utilizing the possibility for short-time work that is offered by the government and partly or fully paid by the government in the countries we operate in. Today, we are using that type of support for short term in all countries in a little bit various extent, but in total, around 750 persons are affected by that type of measure. Yeah.
Okay, it was our highlights.
Would there be any questions from anyone else listening in?
Hi, this is Miguel from Handelsbanken. Can you hear me?
Yes, we hear you.
Yes.
[Foreign language]
Yeah, what could you elaborate a bit the magnitude of the used cars pricing pressure? Is it double digits, or can you say something on that?
Let's see if I followed. You said the price pressure on used car, and then you said, is it?
Is it the decline double digits or-
Oh, okay.
Elaborate the big... magnitude of the decline.
Oh, you mean it's a decline in profit, you mean then, in the margin level? Is that your-
No, no, no, in the used car, how much the customers are paying for the, for-
Oh, yeah, yeah.
How much they have dropped?
Price, each car.
Yeah.
Yeah.
Yeah. Oh, it's not easy for the moment to say it, but-
I understand.
But if I look at some figures, we can have an auction company, Kvarndammen is the name. They dropped a report last Sunday over their auctions, they are selling cars. And they said it's a little bit up again after they... It was around 10% less in price for used cars. And for me, I see in total, now I talk Sweden. In total, in Sweden, there is too much cars in stock for all dealers for the moment. But everybody reduce the new car delivery for the moment, and after a while, it will be a lack of used car, and then the price started to increase again.
I've seen it in the last crisis, 2008, it was the same situation at that time. We can see there is lower for each week, stock of used car in the market. But when the pricing is going up again, I can't give you a forecast for that. And in Norway, another figure in Norway, it was, I read in a newspaper in Norway, a car magazine you can say. They said the demand, if you go back a couple of weeks ago, it was weaker, the demand for used car, and last week it was a little bit better again.
There is a change, because in Norway, they closed down much more what we have seen here in Sweden. It's totally different between Sweden and Norway. Okay?
Okay, good. Thank you.
Mm-hmm.
Yeah, hi, Mats Liss, Kepler Cheuvreux. I just had a question regarding the sequential performance now. I mean, we are way into the second quarter, I guess, normally a seasonally strong quarter with a lot of servicing done ahead of the driving season and so on, and after the winter season also. You mentioned that Swedish car service is doing well, and Norway is opening up.
Yes.
What—could you give some flavor there about... I mean, and then again, we see that car orders have sort of slowed down and so on. But, normally, I mean, the second quarter is very strong, and the strongest of the year. Should we expect it to be similar to that, or is it sort of a considerable slowdown to be expected now in the second quarter?
Yeah, I, I think normally the second quarter is a strong quarter for that. And I think right now, if we see how it looks, it looks rather similar. However, I think one needs to be a little bit cautious what will happen going forward, right?
Have in mind that Luxembourg and Belgium still are closed, totally closed, and will open up in the middle of May. So half of the quarter is destroyed, if I can say so, in the service business and the car business. And when we open up in Luxembourg and Belgium, I guess it will be on a low.
Low
... level, in the beginning, and the demand will be low as well. So, it will be a really bad quarter for the West Europe. And in Sweden, we had the tire season, and the government prolonged the tire season from the middle to April to the end of April. And it was really good for the business, because often we had a long queue. Now we have time to discuss with the customer and find some additional sales. So, the demand in Sweden has been, in April, very good. And what we can see, we said in Norway, we had what you call it in English, Korttids?
Short-time work.
Yes, short-time work. In the service business, they are back in Norway now, and we see the demand is coming back in Norway now, in the end of April. But to navigate in this situation we are in now is not easy for us.
Things tends to-
Mm-hmm
... change very rapidly.
Yeah.
We have a little bit of respect for that.
Yeah. Yeah.
That is where we are right now, at least-
Yeah
... which is one starting point-
Mm-hmm
... almost one month into the second quarter.
Mm-hmm.
Yeah. Yeah, I guess Sweden is an important market for us, I guess it's-
Yeah, yeah, it's important, but when the factory has been closed a couple of weeks-
Yeah
... we don't get new cars. So, what I have said before today, that 7-8% of all mechanics, they are working with internal cars. We call it like that, new and used cars. And, we will deliver few cars in this quarter, but we have a big backlog of new cars for quarter, in the end of quarter two and quarter three.
Okay. Thank you.
Thank you.
Are there any other questions from anyone? No. So if there are no other questions, then, Per, I think we would probably end for now, right?
Yeah.
Of course, if there is anyone that has any additional questions afterwards, you are most welcome to give myself a call or Per a call, of course.
Mm-hmm.
We will help you at
Yeah
... that way also. So, thank you for listening in, and we wish you a good day.
Thank you very much.
Thank you.